Lockdown Anglo’s biggest setback

Anglo American expects the biggest impact on its mines from the global Covid-19 pandemic to be felt in SA, where the government-imposed 21day lockdown started on Friday.

Anglo American expects the biggest impact on its mines from the global Covid-19 pandemic to be felt in SA, where the government has imposed a 21-day lockdown from Friday.

Anglo, one of the world’s leading diversified mining companies, said it expected to produce up to 3-million tonnes less iron ore and 2-million tonnes less export thermal coal from SA due to the shutdown.

“The rail and port logistics infrastructure to support the export of iron ore and coal is expected to continue to service the operations during this period,” the company said on Friday.

“Production from Anglo American’s major operations in other countries has not been affected materially to date and we are taking all appropriate preventive measures to reduce the probability of the virus spreading, including by reducing the density of people on our sites,” it said.

Two new projects in development, the $5bn (R88bn) Collahuasi copper mine in Peru and the Woodsmith fertiliser feedstock mine in the UK, have been curtailed.

“Mines in Peru and SA are more often closely associated with the communities that have grown up around them,” said SP Angel analyst John Meyer.

While Anglo, a R714bn company, has similar minerals as its peers — with iron ore, copper, nickel and coal — it also has platinum group metals and diamonds in its portfolio, which set it apart from other large diversified miners.

Anglo had a responsibility to its workforces in SA, Peru, Chile, Australia, Brazil, Colombia and the UK, keeping them safe during the global pandemic, said CEO Mark Cutifani.

“We also have a clear responsibility to protect the integrity of our business and assets so that we are ready to restart and ramp up any affected operations safely and as quickly as possible once permitted to do so,” he said.

“This approach will enable us to minimise any interruption of supply to our customers and be in a position to support what will be a vital economic recovery phase for the countries in which we operate and the global economy.”

LIMITED OUTPUT

Both Anglo’s JSE-listed subsidiaries, Anglo American Platinum (Amplats) and Kumba Iron Ore, updated the market on Friday. They outlined their limited production under the strict lockdown, which has brought large swathes of SA’s mining industry to a halt to curb the spread of the Covid-19 virus.

Amplats, the world’s secondlargest source of platinum group metals, halted refined metal production in March after the second of two converters was closed for repairs.

Amplats has guided the market to expect refined output to resume on May 25, lowering its full-year production forecast by a fifth, or 900,000oz.

It has shut all mines apart from its opencast Mogalakwena and highly mechanised Mototolo mines in Limpopo as well as keeping its Polokwane smelter open to process concentrate from these two mines.

Because Amplats cannot refine any metal, this news is unlikely to affect the prices of platinum group metals.

Kumba has temporarily cut its workforces at the Sishen and Kolomela mine in the Northern Cape by half to secure permission from the department of mineral resources & energy to continue operations on a reduced scale.

It has 6.4-million tonnes of processed ore stockpiled and ready for sale, with limited train services from Transnet Freight Rail to move ore 860km from the Northern Cape mines to Saldanha port.

THERMAL COAL

At the $2bn Venetia underground diamond mine project in Limpopo, the workforce has been reduced by three-quarters. De Beers, which is 85% owned by Anglo, is building the mine.

At Anglo’s SA thermal coal mines, which deliver coal into the export market as well as coal-to-liquid fuels company Sasol, between a half to a third of staff remain at the assets. Onefifth of the workers at the Isibonelo mine, which supplies Sasol, have been sent home.

In Peru, the government added 13 more days to its 15-day quarantine, which should end on April 12. Anglo has already pulled most of its staff and contractors off the Quellaveco project, which is planned to start production in 2022.

“Construction work is significantly reduced, with only critical areas of the project continuing as normal, until … workers can return safely,” Anglo said.

At the partially built Woodsmith polyhalite mine that Anglo bought as part of its R7.6bn takeover of financially distressed Sirius Minerals, most construction and development has stopped, the company said.

Cutifani has said Anglo needs to invest $3.3bn to complete the mine after Sirius spent $1.1bn so far. Anglo will spend $300m a year for the first two years.

Anglo shares ended 1.72% higher at R285.21 on Friday.